Wednesday, May 23, 2012

"Ever since we saw what happened when Lehman was liquidated, they realized we can’t go there. Fannie was taken over as well as AIG and GM to prevent this liquidity event. But I think the market is just liquidating, irrespective of whether the powers that be want it or not.

I just think that process is picking up into a tsunami..."

- Eric Sprott via a recent King World News Interview, read the full interview here:

Wednesday, May 16, 2012

The beating that Sprott Inc.'s shares have taken in recent months may have made them an attractive entry point for investors looking to play a bullish outlook for gold

Forty per cent of Sprott’s $9.7-billion in assets under management are invested in bullion, while the precious metals exposure rises to 70 per cent when one includes the gold and silver equities in its mutual and hedge funds.

Eric Sprott, the firm’s founder and architect of the dominant precious metals theme, is a big believer that the price of gold and silver – as stores of value – will climb as governments debase their currency by printing money to stimulate their economies. While the metals stocks have sharply lagged their bullion peers, the firm argues that these oversold stocks are poised for a rebound.

“We believe that the prime catalyst for this stock continues to be a rally in precious metals equities,” says Scotia Capital Markets’ Phil Hardie. “Given recent weakness, we believe the valuation is now looking quite reasonable for those who ascribe to Sprott’s underlying investment themes.”

Saturday, May 12, 2012

Mr. Sprott is also concerned at mushrooming growth of derivatives. This part of modern finance is based purely on financial vaporware. There’s no relation to creating underlying wealth. For example, one company might have a trading program with a slightly positive bias, and so buys and sells accordingly. Another has a trading program with a slightly negative bias, and so sells and buys accordingly.

The crazy thing is that, despite everybody looking at the same market, the players all think they’re “making money” with all of their in-and-out trading. Maybe or maybe not — although a lot of people extract big money from the Wall Street system. But the whole process wreaks havoc on the idea of creating wealth by investing in the best companies with the best ideas and assets.

All along, derivative exposure is growing. But what happens when there’s a market setback, and the derivatives trigger? There’s no way that all the exposure can ever get covered. There’s not enough money to go around. We’ll see failure in the derivatives markets, and it will likely tank other parts of the world of finance, if not the larger economy.

Friday, May 11, 2012

"I think it’s counter intuitive. Gold normally doesn’t go up when things are the most extreme. When we had the RTO announcement on Feb 29th, it got crashed, which seemed somewhat counter intuitive. I’m going to fall back on Jim Grant’s statement here on CNBC when he said all markets are manipulated. We know the credit markets are manipulated. I suspect that central banks that are fighting this contagion out there don’t like gold going up. So I think it’s always somewhat counter intuitive. The people who sell paper gold and paper silver can rule the markets over the short term, but I think in the long run the physical participants will win the day."